Let's say that I'm getting a $36,000 loan from a bank at .75% interest. I'm a 21 year old college student with a guaranteed job after graduation as an officer in the Army and do not have to start paying off tuition until after I graduate and receive my commission as a lieutenant. What do I do with said $36,000?
The first question that comes to mind (thank you for your future service, btw), is what is the purpose of the $36000 loan? That's a killer interest rate, but what are the repayment terms? Do you have any other expenses between now and your commission?FuskieWho is confused as to why you have such a large loan, unless it's just to tie you over until you start earning a paycheck, in which case paying your expenses would be what I would do with the money, then pay it back as best you can afterwards...
Most would invest in equities. However, borrowing money to invest in stocks is regulated and could be a problem.Most would invest in mutual funds while they learn the market. An S&P 500 stock fund such as Vanguards 500 Index fund (ticker VFINX) or a total market index fund such as VTI are good core investments.As you gain experience, most would branch out to include a growth fund, hot sector funds, an international fund, a REIT fund, and for the conservatives a bond fund. Adding a few stocks is possible as you become aware of good opportunities.Usually you will want some kind of emergency fund to cover the unexpected. A credit card with borrowing capacity can cover part of this. A bond fund with check writing privileges can work. Low interest rates work against the traditional interest bearing checking account or money market account. How large yours needs to be is controversial. But think about how you would cover a $1000 auto repair. Credit card covers it til the bill comes in. That gives you time to decide where best to get funds from. Think about it and decide what works in your situation.
Its called the "Cow Loan" to us at West Point, or officially, the "Career Starter Loan"All Academy students get access to it from USAA. Basically to be used for whatever you want; car, pay down debt, investing, whatever. Repayment: ~$6-700/ month for 5 years. My goal is to grow the loan and make it basically pay itself back.I was going to start a Roth IRA and then open an investing portfolio
The main problem I see is that the Roth IRA is essentially a retirement vehicle, and it is not expected that you withdraw the money until you are 59 and a half, BUT you can take an amount equal to your contributions anytime without tax. That's good if the account makes money; the profits may be left in the account and will enjoy compounded growth over the years. That is, if everything works out. OTOH, if the account loses money, then you may not be able to repay the loan. Worse, you will not be able to deduct your losses on your income tax return.For more info on Roth withdrawals, see: http://www.obliviousinvestor.com/roth-ira-withdrawal-rules/ culcha
Yup, well aware that the IRA is for retirement. Thought it would be a good idea to start early with a nice chuck of money in order for the compounding interest to have more of an effect over time. Other thought is maybe starting the IRA and then getting a car or something. I'm really not sure. I have a pretty diversified portfolio picked out if I do decide to invest. Most of the investment will be put into one of the motley fool funds, and then a few grand spread about some large companies that pay dividends, then a little bit put into gold and silver. Just wanted a little input from wiser, more experienced people to see what you guys thought.
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